How to write a dropshipping business plan

You want to dive straight into creating an eCommerce store but, before you do, it's best to get your planning phase in order. This is where a solid business plan comes in. It will be an important document you will use as you build your business from the ground up. Should you need to request a loan or attract financial partners, your business plan is what potential investors will ask to review.

One of the illusions with the dropshipping model is that it can be started without any, or minimal, preparation or planning. This couldn't be less true. While it is a business model that is more accessible due to its lower start-up costs, creating a dropshipping store still requires a research stage.

Advantages of drawing up a business plan:

1. It creates a blueprint of your dropshipping business

Like a map or GPS, it helps to steer your efforts in the right direction. Your business plan will guide you in each step of setting up and starting your eCommerce shop. As you work on your business it will feel less daunting with your planning already completed.

2. You will spot any potential problems

As you work through planning the key areas of your dropshipping business it will be easier for you to notice potential problems. Perhaps there are certain things you overlooked or underestimated. Putting this plan together will bring these to your attention and prevent unwanted problems further down the line.

3. It helps create a timeline for your business objectives

It's easier to work on projects when you know roughly how much time will be involved to reach your milestones. A business plan breaks down the building and running of your business into more manageable steps. From there, you can plan objectives along the way.

4. Planning expenses is easier

With any business, there will be some costs involved when taking on a dropshipping store. Advertising costs, web hosting costs, paying for your domain name, and subscribing to a dropshipping supplier programme will be expenses for you to take into account. Anticipating an estimate of these will help you plan your budget.

5. Writing it is not as daunting as it looks

While at first glance it might be daunting to complete a business plan, you'll be thankful you took the time to get one ready. Use a template with a standard structure to guide you through each area of your business to address. You can use bullet points to help make your document concise and save time.

Executive Summary

This is an outline of everything in your business plan.

It should include your mission statement and objectives, describe your product, where your company is based, who is in your company leadership team, and financial overview.

Overview and objectives

Talk about what you would like your dropshipping business to achieve in 1-5 years time.

Keep your objectives concise and SMART (specific, measurable, achievable, realistic, and time-bound).

Products

The details of your products for your eCommerce store will be here.

Where will you source your products and who will be your supplier?

What will be your product category and do you intend to expand this within 1-5 years?

What is the wholesale cost of your products and how much profit margin do you intend to add?

How will you get these products to your customers?

What are the challenges you may face? Will the COVID-19 pandemic or Brexit affect getting the products from the fulfilment centres to your customers?

Market research

How is the market landscape? Talk about statistics you find such as the projected growth in the market for your product niche, current customer spending, and size of the eCommerce market.

Produce a SWOT analysis: cover key information about the strengths, weaknesses, opportunities, and threats in your chosen market.

Create a competitor report: who are your direct and indirect competitors?

Who is your target audience? Create a customer profile to indicate the age, gender, location, and annual income of your target customer.

Marketing strategy

Detail your plan for marketing to your target customer.

Choose which online marketing channels you will use, such as social media, website blog, email marketing, online advertising, search engine optimisation (SEO), paid search engine marketing (SEM), and referral marketing.

How do you predict using these channels will generate sales?

Consider the 7 Ps of marketing: product, place, people, packaging, promotion, process, price.

What will be your objectives and milestones for your marketing plan?

What is your marketing budget?

How will you track your marketing and advertising efforts?

Operations plan

Will you hire staff to help run your dropshipping business?

Do you anticipate that you will need more staff when your business grows within the next 5 years?

Demonstrate that you are aware of what tax, insurance, and legal regulations will affect you.

Management team

Will you initially run the business alone or with partners?

Who will be in the management team?

What will be their salaries?

Financial analysis

Include your cash flow statement

Operating budget

Profit and loss statement

Balance sheet (assets and liabilities)

Break-even analysis

Personal survival budget (how much you will need to earn from your dropshipping business per month in order to live)

Once your business plan is complete, you'll be happy to have this document ready to refer to as you embark on starting your eCommerce store. Consider it a living document and edit it as you need to over the next years in business operation.